Accountants comment on agricultural assets: Changes in accounting for bearer plants are welcomed but further guidance is needed on measuring costs, says ACCA global forum

Global 11 Nov 2013

Bearer plants are an essential part of the economies of some countries, such as rubber in Malaysia, and wine-producing countries. ACCA agrees with much of what the IASB proposes, such as applying the principles of IAS 16 ‘Property, plant and equipment’ to bearer plants, including the option of adopting either a cost or revaluation model once the plants are mature and bearing produce. Whilst bearer plants reach maturity, they will be measured at accumulated cost, like a self-constructed manufacturing plant

—Paul Cooper, corporate reporting manager,ACCA

The IASB’s proposals to amend the accounting methods used to recognise a plant or tree used to generate produce (a ‘bearer plant’), have been welcomed by ACCA’s (the Association of Chartered Certified Accountants) Global Forum for Corporate Reporting

The current requirement to recognise bearer plants at fair value in financial statements is generally not an appropriate accounting method, in view of the function of these plants, said ACCA’s (the Association of Chartered Certified Accountants) Global Forum for Corporate Reporting.

The forum explains these plants generate the produce sold by a company to generate revenue, and are not harvested each year as the produce itself.

After discussing the proposals with the forum, ACCA submitted its response to the International Accounting Standards Board (IASB’s) exposure draft on bearer plants.

Paul Cooper, ACCA’s corporate reporting manager, said: 'Bearer plants are an essential part of the economies of some countries, such as rubber in Malaysia, and wine-producing countries.

'ACCA agrees with much of what the IASB proposes, such as applying the principles of IAS 16 ‘Property, plant and equipment’ to bearer plants, including the option of adopting either a cost or revaluation model once the plants are mature and bearing produce. Whilst bearer plants reach maturity, they will be measured at accumulated cost, like a self-constructed manufacturing plant.

'How well plants will bear produce can vary over their life cycle, and ACCA believes that this can be reflected in a limited amount of fair value disclosures in the financial statements, whilst adopting the cost model for recognition of the bearer plant.

'We also agree with IASB’s proposals that roots, such as sugar cane or rhubarb, should be accounted for in the same way as trees that produce fruit, as they can bear produce in more than one season, compared to annual crops where seeds need to be sown each time.

'However, more guidance is needed on the treatment of certain costs such as the rent of land where the bearer plant is growing, and even the impact of the condition of that land.'

Read ACCA’s full consultation response via the 'Related Links' section, left of this article.